| PwC gets Supreme Court notice on charges of violating Fema, FDI rules |
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New Delhi, 6 December The Supreme Court on Friday issued a notice to auditing major PriceWaterhouse Coopers Pvt Ltd (PwC), five of its network firms, the Union government, the Reserve Bank of India ( RBI), the Registrar of Companies and the Central Board of Direct Taxes on a public interest litigation ( PIL) filed by Centre for Public Interest Litigation ( CPIL), an NGO run by senior advocate Prashant Bhushan. The key theme of the various allegations made in the petition is that the network is infusing foreign funds into local audit firms in violation of Institute of Chartered Accountants of India ( ICAI) rules and the foreign direct investment ( FDI) policy, which do not permit foreigners to practise the auditing profession in India or invest in Indian audit firms without RBI approval. CPIL has alleged that to achieve this end, PwC and its network firms have allegedly engaged in falsification of books of accounts, evasion of income tax and violation of FDI rules, RBI guidelines and the Foreign Exchange Management Act, among others. The move comes at a time when the network is in the process of rebuilding its brand, which suffered asetback following the alleged involvement of one of its associates, Price Waterhouse, in the ₹ 8,000- crore Satyam Computer scandal. While cases are on in Indian courts, US regulators have slapped a penalty of $ 7.5 million on PwC and associates. Price Waterhouse ( Bangalore), Price Waterhouse ( Gurgaon), Price Waterhouse & Co ( Kolkata), Lovelock & Lewes and Mumbaibased Dalal & Shah were the other firms named in the petition. The bench of Chief Justice P Sathasivam and Justice Ranjan Gogoi issued a notice to the respondents, saying the issues raised needed to be examined. CPIL has also sought systemic changes, including aseparate regulator for auditors to look into such irregularities. Turn to Page 14 > Issues raised in public interest litigation need to be examined, says apex court THE MAJOR ALLEGATIONS levelled by CPIL against PwC ISSUE LAWSVIOLATED Inflowof ₹ 240 crore FDI policy, RBI from abroad guidelines Unexplained credits of ₹ 41 cr Fema, ICAI policies, in an intra- networkacquisition Income TaxAct Wrong accounting of insurance Companies Act premium PRAYERS 1. Detailed investigation by government 2. Separate regulator for auditors |
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| PwC gets SC notice on Fema, FDI rules violation charges |
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The petition has cited official filings such as balance sheets and annual reports and media reports to allege that some of the entities received close to ₹ 240 crore from " undisclosed" sources. " The importance of receipt of these funds in FY11 alone can be appreciated from the table below as without these funds, these entities would have incurred huge losses," the petition said, adding that receiving such money from foreign entities would amount to ceding of control, which was in violation of the FDI policy. Quoting media reports, the petition said the matter had already been referred by the ICAI to the RBI. Other allegations include the creative structuring of an acquisition of Mumbai- based Dalal & Shah through unexplained credits into accounts of its partners and irregularities in accounting insurance policies. According to the petition, all PwC India entities had a common professional indemnity insurance ( PII) cover. However till FY11, only three entities used to pay for the premium in the following ratio: PricewaterhouseCoopers Pvt Ltd ( 20 per cent), Lovelock & Lewes ( 28 per cent) and Price Waterhouse ( 52 per cent). " However, Price Waterhouse, Bangalore, Satyam's auditor, used almost the full PII cover of $ 60 million (approximately ₹ 280 crore) by FY11 without even paying a single rupee of premium towards it," the petition said. The petition quoted a PwC spokesperson's statement to The Times of India in May 2012 that said, " PwC India entities have not received any query from RBI on this matter. The grants from PwC Network to PwC India entities are not an investment. These are received in order to assist in maintaining the standards required of all member entities of PwC Network in India and were received at our request as outright nonrefundable grants facilitating enhancement of the resources and skills. The grants have come through regular banking channels. These are current account transactions which are under the automatic route." PwC officials were not available for comment. An email seeking comments sent to the official spokesperson, citing specific allegations in the petition, did not elicit any response. In a text message, a spokesperson said, " If we do (have a statement) will share." |
| HC admits plea to wind up KFA |
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Less than three weeks after admitting a petition to wind up UB Holdings Ltd, the Karnataka High Court has admitted a similar petition against another UB Group company, Kingfisher Airlines, pushing Chairman Vijay Mallya further into a corner in the fight to get him to repay the airline's massive debt to creditors. The move also invalidates, albeit temporarily, Mallya's repeated assurances to the court and the public of a revival plan for the carrier. On Friday, the court admitted awinding- up petition filed by Aerotron Ltd, a supplier to the cash- strapped airline, claiming dues of $ 6 million, or about ₹ 35 crore. On November 19, judge Anand Byrareddy admitted a similar petition by BNP Paribas against UB Group's principal holding company, UB Holdings Ltd, which owed creditors about ₹ 600 crore. Hearing the winding- up case against Kingfisher Airlines on Friday, Byrareddy dismissed as evidence a UB Group letter assuring of a potential investor in the airline. Earlier, the court had given Kingfisher Airlines lawyers time till Friday to update it on progress in efforts to revive the airline. An email from the unnamed investor's law firm to State Bank of India, asking the bank to withhold any action on Kingfisher Airlines' assets for the next two months was also considered " inadequate". A deal with the investor, whose identity wasn't revealed by Mallya or his lawyers due to " strict confidentiality clauses", was expected in about 90 days. Mallya and the prospective investor were to submit by the end of this year a join revival plan to the Directorate General of Civil Aviation. Now, the court has given the company four weeks to appeal against the order. If Kingfisher fails to secure a stay against Friday's order, an advertisement announcing the winding- up decision will be published in newspapers, notifying all creditors to stake their claim. Employees of Kingfisher Airlines, impleading in the case along with the company and opposing the winding- up petitions of creditors to avoid job losses, also have four weeks to file an objection. |
| Birla clarifies political donations by law |
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Mumbai, 6 December Reacting to a media report on the Central Bureau of Investigation ( CBI) handing a diary to the Supreme Court that listed an estimated 1,000 payments by an Aditya Birla Group company to politicians and members of Parliament, the group spokesperson said it was by a trust set up under the Companies Act by companies for donations to parties. The diary was recovered by the CBI, probing the coal- block allotment case. It had raided Aditya Birla Group firms on October 16. " The contributing companies, after serious deliberations and based on the best international practice in this regard, decided to create General Electoral Trust in 1998," said the company in a statement issued on Friday. " Its sole purpose is of making contributions to various parties or individuals nominated by parties, and to independent candidates standing for Parliamentary or state Assembly polls." By the statement, the trust makes contributions only to those parties or candidates registered with the Election Commission. It said all the contributions were duly accounted for and reflected in the audited published accounts of the companies. |
Source Business Line
Raising funds from abroad made easy for unlisted firms
OUR BUREAU
NEW DELHI, DEC. 6:
The Government has notified rules allowing unlisted Indian companies to raise capital abroad for two years without prior or subsequent listing in the stock markets subject to some conditions.
According to a notification from the Department of Industrial Policy & Promotion on Friday, unlisted companies will now not have to list in the stock markets to raise capital from abroad for two years.
However, they will be allowed to list abroad only on exchanges that are in jurisdictions compliant with International Organisation of Securities Commissions and Financial Action Task Force or those with which the Securities and Exchange Board of India had signed bilateral agreements. At present, unlisted companies, which have not yet accessed the ADR/GDR route for raising capital in the international market, would require prior or simultaneous listing in the domestic market, while seeking to issue such overseas instruments.
Unlisted companies, which have already issued ADRs/GDRs in the international market, have to list in the domestic market on making profit or within three years of such issue of ADRs/GDRs, whichever is earlier. It is mandatory for the unlisted Indian companies to fully comply with norms related to foreign direct investment while they raise funds abroad.
"The capital raised abroad may be utilised for retiring outstanding overseas debt or for operations abroad, including for acquisitions," the notification said.
(This article was published on December 6, 2013)
Minister calls for meeting with bank heads to boost lending to small sector
OUR BUREAU
KOLKATA, DEC. 6:
To encourage bankers to lend to MSME sector under the Pradhan Mantri Employment Generation Programme, the Ministry for Micro, Small and Medium Enterprises has called for a meeting of the heads of the public sector banks on December 9.
K.H. Muniappa, Union Minister of State (Independent Charge) for Small and Medium Enterprises, toldBusiness Line here that "in some areas", bankers were found unwilling to lend under to the scheme.
"The meeting has been called to learn about their problems and sort them out," he added. The Minister was here to attend the Bengal Chamber Award for MSMEs on Friday.
The employment scheme was launched in 2008-09 by merging the existing employment generation programmes — Rural Employment Generation Programme and Pradhan Mantri Rozgar Yojana. Under the scheme, loans are given without any collateral.
Muniappa said the Government would stand guarantor for a significant portion of the loans and provide matching subsidies under scheme.
According to the bankers, many of such loans had turned bad as the subsidies were credited to the loan accountholders' account.
The Minister said the Government intends to reach out to 1 lakh would-be entrepreneurs in 650 districts across the country through the scheme during 2013-14.
The Government aims to train 40 lakh people through the primary technical training centres during the 12th Plan period. "World Bank would provide funds worth 2,200 crore for the training programme," he said.
jayanta.mallick@thehindu.co.in
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